USD/JPY Forecast: Bouncing from 107.00, still at risk of reaching lower lows

Valeria Bednarik FXStreet

USD/JPY Current Price: 107.12

Wall Street edges lower as US Treasury yields extended their slides, backing the yen.
Japanese data continues to indicate a profound economic recession.
USD/JPY bounced from the 107.00 region, but a steeper recovery is out of the picture.

The USD/JPY pair traded as low as 106.98, ending the day a couple of pips above this last. The greenback came under selling pressure after the US Federal Reserve monetary policy announcement but managed to recover some ground against its European rivals as equities reacted negatively to the headlines. In turn, the poor performance of Wall Street maintained the yen stronger against its American rival. Furthermore, US Treasury yields extended their declines, with the yield on the 10-year note returning to its April/May levels.

Early on Wednesday, Japan published its May Producer Price Index, which fell by 2.7% YoY, worse than anticipated. Also, Machinery Orders fell by 12% MoM in April and were down by 17.7% when compared to a year earlier. During the upcoming Asian session, the country will only release minor figures related to foreign investment, hardly a market mover.

USD/JPY short-term technical outlook

The USD/JPY pair is trading at the lower end of its daily range and is still at risk of falling. The 4-hour chart shows that it has spent most of the day developing below the 200 SMA, which provided intraday resistance within Powell’s presser, currently at 107.50. The 20 SMA heads firmly lower well above the larger one, while technical indicators have barely bounced from oversold levels. The risk of a steeper decline should increase on a break below 106.95 and dilute if the pair recovers beyond 107.90.

Support levels: 106.95 106.60 106.25

Resistance levels: 107.50 107.90 108.25

View Live Chart for the USD/JPY

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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